San Diego Union Tribune

A Supreme Court ruling yesterday derailed a California patients’ rights law that opened HMOs to multimillion-dollar court judgments if they refused to pay for medical care authorized by a doctor.

The justices voted 9-0 to block lawsuits filed by Texas patients against two HMOs, ruling that the insurers are shielded from damage actions in state court under the Employee Retirement Income Security Act. The court ruled that patients can only sue insurers in federal court.

The 1974 federal law allows patients to sue insurers only for the cost of the medical services they were denied, not for pain and suffering that may have resulted from the denial of coverage.

Consumer advocates and physicians’ groups were quick to criticize the court’s decision and called on Congress to pass legislation that would give consumers the right to sue managed care plans.

John Nelson, the president of the American Medical Association, said the ruling allows HMOs to “practice medicine without a license.”

“While the AMA appreciates those managed care plans that put patients ahead of profits, the Supreme Court action significantly erodes patients’ ability to obtain medically necessary care by placing patients at the mercy of managed care plans that play doctor,” Nelson said.

The ruling affects about 72 million Americans covered by HMOs and undermines a key provision in patients’ rights laws in 10 states, including one in California that went into effect in 2001.

In California, patients can seek unlimited damages from an HMO in a lawsuit as long as they first take their case through an independent review by a panel of physicians chosen by the state.

Health insurers argue that hefty jury awards drive up the cost of health care. But consumer advocates say the California law discourages lawsuits because HMOs either provide the care ordered by the independent panel or, in cases where the panel upholds the HMO’s denial of care, the HMO has independent medical support for its decision.

“Now there is no longer a legal deterrent to HMOs that cut cost corners by overriding physicians’ decisions,” said Jerry Flanagan, a spokesman for the Foundation for Taxpayer and Consumer Rights, a Santa Monica-based consumer organization. “It was the threat of legal liability that made HMOs less likely to deny care in the first place.”

The insurance industry argued yesterday the ruling does not change basic protections — including the right to appeal HMO coverage decisions — afforded the estimated 21 million Californians covered by managed care plans.

Since the state implemented independent reviews in January 2001, 2,258 complaints from patients about their HMOs’ coverage decisions have gone to the panel. About one-third of the cases were decided in favor of the patients, according to the California Department of Managed Health Care.

“There have not been a significant number of lawsuits, in part because we have a strong dispute resolution process,” said Steven Tough, chief executive of the California Association of Health Plans. “Health plans are chartered to deliver health care and respond to patients’ needs, and I don’t think they sit down every day and think of litigation as the driver that keeps them performing.”

In reaching its decision, the Supreme Court said HMOs make “pure eligibility decisions” and don’t act as treating physicians.

Juan Davila, who sued Aetna Healthcare under the Texas patients’ rights law, took what he said was inferior pain medication instead of the Vioxx his doctor had recommended because Aetna Health would not pay for the more expensive drug right away. The cheaper medication caused bleeding ulcers, he said.

The Supreme Court heard his case alongside that of hysterectomy patient Ruby Calad, who said Cigna Healthcare of Texas turned her out of a Houston hospital after one day of recovery.

The HMO would not pay for a longer stay, even though her doctor recommended it, and she was back in the emergency room a few days later with complications.

The Supreme Court did not decide whether Davila and Calad deserved better from their HMOs, only whether federal law trumped state law in deciding if and where they could sue.

Patients’ rights advocates now will have to turn to Congress, where legislation to authorize suits has stalled. Even the Supreme Court hinted in its ruling that current law is inadequate to deal with the issues raised in the Texas lawsuits.

“A regulatory vacuum exists,” Justice Ruth Bader Ginsburg wrote in a concurring opinion. She said that, while she agreed with the ruling, “I also join the rising judicial chorus urging that Congress and this court revisit what is an unjust and increasingly tangled” legal system for health care claims.

The Supreme Court decision is expected to provide plenty of fodder for the presidential campaign. Sen. John Kerry, the presumptive Democratic nominee, voted for legislation in 2001 that would have given patients a broad right to take their health insurers to court.

President Bush opposed that measure, saying it would have driven up health care costs, and supported a scaled-back version.

During the 2000 campaign, Bush, who was then the governor of Texas, took credit for the Texas patients’ rights law and pledged that “people will be able to take their HMO insurance company to court.”

Yet in a court filing, the Bush administration urged the Supreme Court to bar the Texas lawsuits.

“The president’s opposition may have played a key role in today’s decision,” said Ron Pollack, executive director of Families USA, which filed a brief urging the high court to permit patient lawsuits.